AIM: Business Confidence Passes 'Neutral'

Business confidence ticked up in January, as employers saw Congress tackle federal fiscal issues, according to The Associated Industries of Massachusetts (AIM), which saw its Business Confidence Index rise 2.6 points, to 50.4.

"The agreement on taxes at the beginning of the month resolved a large issue facing many businesses, and we have since seen further signs that Washington may be moving past the deadlock of the last two years," said Raymond G. Torto, global chief economist at CB Richard Ellis Group Inc. and chair of AIM's Board of Economic Advisors.

He noted that while January was better than late 2012, confidence was still not as high as a year ago.

Torto cited upcoming policy decisions and a slow economic recovery "with essentially no growth in the fourth quarter of 2012" as reasons behind the moderate business confidence.

"The federal budget cuts that are next on Congress's agenda could be damaging to major sectors of the state's economy, ranging from higher education and health care to defense manufacturing, so many employers face another round of uncertainty. It is not surprising that the Business Confidence Index is off 2.4 points from last January," he said.

All sub-indices rose in January, but were also lower than a year before. The largest gain was in the Future Index, which tracks expectations for the upcoming six months. It added 4.1 points, to reach 51.9.

The Current Index, measuring existing conditions, was up 1.2 points to 48.9.

The U.S. Index of business conditions nationally added 3.4 points in January to 41.6, and the Massachusetts Index of conditions within the edged up fourth-tenths of a point to 47.2.

Meanwhile, the indexes assessing the situations of respondents' own operations also saw gains. The Employment Index was up 1.7 points, to 52.3.

"The signs on employment are a bit stronger, but do not point to very much job creation in the immediate future," said BEA member Katherine A. Kiel, professor of economics at the College of the Holy Cross. "Whereas for the past six months, 25 percent of responding employers report adding staff and 19 percent had reductions, the figures for the six months ahead are 20 percent adding and 13 percent cutting. Until the economy really starts growing again, we will not see employers hiring in large numbers."

Richard C. Lord, AIM's president and CEO, noted that Massachusetts is continuing to pursue politics to advance economic growth and job creation.

"The freeze on unemployment insurance rates for 2013, now moving forward in the Legislature with strong bipartisan support – and the governor's endorsement – is an example," he said. "A freeze will remove an uncertainty facing the state's employers, and avert a deterrent to hiring, without risk to benefits to those out of work through no fault of their own."

Mass. Business Confidence Up Slightly